The challenges of providing education and formal employment, encouraging the empowerment of women, and stemming the rise in chronic diseases continue to be serious concerns throughout the developing countries and emerging markets of the world. Institutional roadblocks, mistrust between governments and investors, inconsistent and low-quality delivery of services, and a simple lack of funds have at times made it impossible to find solutions to these issues.

A growing number of developed countries–particularly the United States and European countries–are exploring a new financing mechanism called social impact bonds (SIBs) as an alternative to traditional ways of resolving some of their most intractable social problems. SIBs are a groundbreaking opportunity to bring private investors, philanthropic organizations, nongovernmental organizations (NGOs), and government to the same table to find innovative and evidenced-based solutions to social problems.

In Mexico, the federal government and several states have begun exploring where SIBs could be a tool for contracting better social outcomes. For instance, the state of Jalisco has been studying the design of a program to move single mothers permanently out of poverty, working in collaboration with the Multilateral Investment Fund, the innovation laboratory for the Inter-American Development Bank Group. Jalisco has a rich history of partnerships with local entrepreneurs and impact investors. In Mexico overall, there is a vibrant ecosystem of NGOs and social enterprises that could provide the services within a SIB. Additionally, there are a growing number of major local philanthropic foundations that have expressed serious interest in using SIBs to develop a more performance-driven social sector in Mexico.